VerySmartInvesting: Markets muddle along on proposals for increased banking regulation

Wednesday, June 17, 2009

Markets muddle along on proposals for increased banking regulation

Worries about increased federal regulation of the banking industry may be keeping buyers away. Dow keeps slipping & sliding, down 20. Decliners are over advancers 5-2 & NAZ was even. Banks were subject to downgrades plus talk of more regulation brought the index to one is lowest levels in 6 weeks (& sinking).

S&P 500 FINANCIALS INDEX

Value
155.49

Change
-4.46

% Change
-2.8%

The Alerian MLP has given up much of its gains from the last month. REITs & junk bond funds also are weak. Treasuries were up, the yield on the 10 year Treasury bond fell 5 basis points to 3.62% (getting further away from 4% reached last week).

Alerian MLP Index --- 1 month

10-Year Treasury Yield Index - 1 month

Oil is having another down day ahead of the weekly inventory report which will be issued shortly.

CLN09.NYM

...Crude Oil Jul 09

...69.35

...

1.12
.......(1.6%)

The consumer price index rose 0.1% in May, below expectations of 0.3%. Excluding food & energy costs, core prices also increased 0.1%. Low inflation enables the Federal Reserve to keep short-term interest rates near zero. The recession is holding down prices with the unemployment rate at a 25-year high & factories operating at record-low levels. Gasoline prices rose 9.6% in May, but they are still much lower than last year when prices at the pump topped $4 a gallon. Due to that decline, consumer prices fell 1.3% in the 12 months ending May, the steepest drop in 59 years but core CPI has increased 1.8% since last year.

•U.S. Consumer Prices Rise Less Than Forecast; Annual Drop Most in 60 Years

Companies (including MLPs) are issuing record amounts of stock. In May, they sold a whopping $64B in stock, topping the previous monthly record of $38B. This is considered to be a contrarian indicator, i.e. companies seem to "know" prices are high causing them to sell stock.

Firms issuing record amount of new stock- MarketWatch

S&P lowered or revised ratings on 22 bank stocks after the recent run up in their shares. S&P mentioned tighter regulation (new measures are being announced today) & increased market volatility. The president announced new initiatives to strengthen regulation of the banking system, targeting enormous bank institutions whose problems could adversely affect the US economy.

•Wells Fargo, Capital One, KeyCorp Are Among U.S. Banks Downgraded by S&P